Memorandum by Ms S Monk
and Professor C M E Whitehead
This memorandum addresses the affordability
problems facing many groups of people who are not eligible for
assistance with their housing costs yet cannot afford market housing.
This is sometimes termed the "key worker" problem because
it is seen to affect employees in essential public services such
as the police, the health service and education, yet the problem
is much wider than that. The evidence, which comes from secondary
data on house prices and incomes as well as surveys of employers
and employees in selected parts of the South East and London,
illustrates the growing scale of the problem and how it is affecting
recruitment and retention of staff in high pressured areas. The
memorandum explores a range of potential solutions, some of which
are already being implemented and others which are worthy of further
There is a growing gap between social sector
and private sector rentsimplying large numbers of households
unable to afford adequate accommodation.
While average incomes are high in London and
the South East, the distribution of income is relatively uneven,
suggesting that a larger proportion of households may need help
with their housing costs.
Many of the households in need of assistance
are in work but at the lower end of the income scale. Therefore
the amount of help required may be lessand for a shorter
periodthan for traditional social sector tenants
Most people aspire to owner occupation and do
not want traditional council housing although they are prepared
to live in rented housing in the early stages of their careers.
Problems of affordability in the housing market
are affecting the labour market, creating difficulties for employers
in recruiting and retaining staff.
The problem is additional to the need for traditional
social housing for priority needs which are also growing in pressured
The main ways to achieve more affordable housing
to build affordable housing on the
back of market housing using s106;
to target available housing more
closely on particular groups;
to help more households in these
groups by increasing total subsidy and by allocating housing in
ways that provide shorter term and lower levels of assistance
appropriate to individual circumstances;
to increase the amount of subsidy
available from employerseither to the household or via
to find additional funding eg from
to limit losses of existing affordable
to change allocation priorities to
concentrate more on key workers; and
to improve access to employment from
those living in lower priced areas.
One of the solutions put forward relates to
what is termed the Intermediate Market, between subsidised social
rented housing and the unsubsidised owner occupied and private
rented sector. Households who are not eligible for social housing
can be assisted to enter owner occupation through shared ownership
and shared equity schemes. These can be operated by housing associations
or by developers directly. There are already examples of developers
selling discounted market housing without public subsidy, whereby
the purchaser buys 75 per cent of the equity and the rest is retained
by the developer as an asset accruing in value over time.
Although research shows that most people aspire
to owner occupation, there remains a clear role for renting, particularly
for younger households at the beginning of their careers who often
expect to move around. There is a case for increased provision
of below market rented housing, again without public subsidy,
provided by housing associations or other non-profit organisations.
Again there are some examples of this, notably in respect of student
accommodation, but this could be extended in high priced areas.
There are also some examples of partnerships between housing associations
and developers to produce sub market housing either for rent or
In addition, employers who are facing recruitment
and retention problems associated with high housing costs and
who also own development land could take steps to ensure that
intermediate housing is built on their land. This includes public
sector bodies such as NHS Trusts, although unless they develop
the land themselves Treasury rules require highest valuethis
should be changed to enable intermediate housing to be eligible.
It also includes private sector bodies who, while motivated by
the need to make profits, could nevertheless take a longer sighted
Increase the supply of housing that is affordable
Widen the definition/acceptance of affordable
housing (to meet this second tier of housing) so that it includes:
subsidised rented or shared ownership
housing provided through RSLs and local authorities;
low cost market housing for sale
provided through the planning system; and
lower priced "ordinary"
market housing for rent provided without subsidy.
Use the existing stock more efficiently:
target vacant units and unfit property;
tackle difficult to let property;
"living over the shop"
private sector leasing.
Increase densities and encourage a better mix
of house types on new market developments according to the context
(urban/suburban/rural). Building near transport nodesas
well as being sustainablecan mean that car parking needs
are reduced, freeing up more space for houses. Higher densities
and a better mix of house types can help meet affordability problems
for those key workers who are potentially able to access market
housing without subsidy.
Get the best out of the planning system:
prioritise affordable housing in
section 106 agreements;
examine the potential for securing
affordable housing in non-residential section 106 agreements where
there are housing implications; and
adopt a more streamlined approach
as delays can be pivotal for both developers and partner RSLs.
Section 106 for affordable housing in non-residential
developmentsbecause the housing that is required is employment-related.
Affordable housing as a use classwhich
would reduce the cost of land for affordable housing.
Use land owned by employersexplore ways
to achieve more affordable housing on land owned by other employers
as well as on publicly owned landnot just the Health Trusts
and Health Authorities but also railway land, defence and other
brownfield sites, including employer allocations in appropriate
Create a local Housing Land Trustto provide
access to funding or pooling public sector land. This could involve
the transfer of land through the use of s106 (commuted payments),
land already in public ownership of one kind or another, or other
sources. The aim would be to assemble land for affordable housing
provision. There could then be "swaps" to ensure that
affordable housing was built in sustainable locations, close to
existing (or future) transport nodes, particularly public transport.
Compulsory purchase at existing use value could
be useful in certain circumstances, although it is recognised
that much of London's green belt is already owned or has options
from house builders.
Increase the ability to pay of specific groups
Increase the flexibility of salary structures,
particularly in the public sectorfor example, by enabling
appointments higher up the grade and abandoning age-related scales.
Weighting, particularly with the proximity of London and its large
weighting, is also an issue.
Provide housing related relocation packagesthese
could range from paying removal costs through various forms of
assistance with rents, loans towards deposits, loans towards mortgages,
mortgage subsidies, to direct housing provision.
Increase access to housing in the second tier
of the housing market by widening the range of equity sharing
initiatives which fill an important role between subsidised renting
and market housing:
traditional shared ownership;
fixed equity shared ownership;
employers' participation in direct
participation by other fundersequity
Encourage the use of pension schemes for house
Leasing for "market" renting by RSLs
and other non-profit bodies.
The current subsidy system includes demand side
targeting, through Housing Benefit, and supply side targeting,
through the provision of social rented housing by local authorities
and RSLs. Policies include:
"starter homes" initiatives
such as Homebuy, introduced in April 1999, which allows people
to buy a home in the private market with an interest free equity
loan from a RSL for 25 per cent of the value of the property.
The loan is repayable at 25 per cent of the current market value
when the home is sold.
These policies need to be further developed
and extended which will require additional funding in order to
address problems in highly pressured areas.
39 Ms Sarah Monk is Deputy Director of the Cambridge
Centre for Housing and Planning Research, Department of Land Economy,
University of Cambridge. Back
Professor Christine Whitehead is Professor of Housing, Department
of Economics at the London School of Economics and also Director
of the Cambridge Centre for Housing and Planning Research, Department
of Land Economy, University of Cambridge. Back